sirius real estate limited interim report 2011

8/3/2019 Sirius Real Estate Limited Interim Report 2011

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Sirius Real Estate LimitedInterim Report 2011


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Sirius Real Estate Limited developsmixeduse commercial sites inGermany into innovative BusinessParks, offering exible workspaceand services to suit small and

medium sized enterprises.

IFC

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IBC

About Sirius Real Estate

Highlights

Our progress

Board of Directors

Chairmans statement

Independent review report

Unaudited consolidated statement of comprehensive income

Unaudited consolidated statement of nancial position

Unaudited consolidated statement of changes in equity

Unaudited consolidated statement of cash ows

Notes forming part of the nancial statements

Shareholder information and corporate details

Contents

38

Total number of properties: Total portfolio split:

28%Production

13%

Other

36%Storage

23%Ofce

Key portfolio statistics

About Sirius Real Estate

Total lettable space (sqm):

1.15m


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nancial statementsbusiness review

www.sirius-real-estate.com 1Sirius Real Estate Limited Interim Report 2011

Highlights

* Excluding property revaluation, change in fair value derivative instrumentsand costs incurred for advice relating to the asset management agreement.

2.5mWith capacity to make furtherdisposals in a protable andtimely manner.

Land disposals

1.0mOn track to deliver 1mof cost savings.

Cost savings

Results highlights

Operational highlights

65,153 sqmAt 5.18 per sqm representing animproved return on investment

New lettings

37,275 sqmCompared to September 2010:73,966 sqm

Move-outs

Good progress on agreeingnew management structure.

Management structureSmartspace

Good demand for highlyexible Smartspace solutions.

Gross annualised rent roll

44.4m

44.4m41.5m

20112010

Recurring PBT

0.9m

1.2m

0.9m*

2011

2010

Average rent per sqm

4.13

4.18

4.18

30 Sept 11

31 Mar 11

Property portfolio

Property portfolio revalued by DTZ.

492.0m

492.0m 505.5m

30 Sept 11 31 Mar 11

Adjusted NAV per share

66.63c

66.63c72.85c

30 Sept 1131 Mar 11

LTV across the portfolio

61.0%

60.2%61.0%

30 Sept 1131 Mar 11

Average monthly sales enquiries

10% increase in average monthly sales enquiries.

957

957

8712011

2010

Occupancy rate

77%

77%73%

20112010


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Sirius Real Estate Limited Interim Report 20112 www.sirius-real-estate.com

Our progress

Increasingoccupancy,revenue,

efciency.

for more information, news and investor relations,visit us online at www.sirius-real-estate.com

The Company is trading broadly in linewith expectations and remains focusedon increasing occupancy, revenues andefciency across the portfolio.

Solid lettingsperformance

We are starting to see somesignicantly improved returnsfrom creating the uniqueSirius product.

E read more in the Chairmans statement on page 6

The team has been focusingon tenant retention withan encouraging reectionof this emphasis shown inthe results.

Focus onretention



Continuedcost reduction

The Companys programmeof cost reduction and costrecovery has continued intothe current nancial year.


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Munich Neuaubing

In July, the Company extended a 34,200 sqmlease with an existing multinational tenantat our Munich Neuaubing site for ten years,which over the lease will generate 44.7m

of income (inclusive of service charge).

Cost benets have come despite the welldocumented increases in electricity andheating costs throughout Germany this year.The main benets have come from optimisingand controlling our facility management andutilities suppliers combined with the use ofsignicantly improved cost allocation tools.

The improved optimisation and transparencyto tenants makes the recovery of service chargecosts an easier process and we expect this willcontinue into the future. Overall, we expectto make further savings of approximately1m in the current nancial year.

Despite the challenging economicbackground we are seeing a muchimproved rate from new lettings.

Average rate per sqmachieved on new lettings

+1.025.18

4.162011

2010

The increase in net lettingsrepresents a solid improvementand contributes to the increasedoccupancy rate.

Net lettings (sqm)

+14,76627,878

13,112

2011

2010

Fewer move-outs (sqm)

36,69137,275

73,966

2011

2010


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Board of Directors

Sirius Real EstateLimited Interim Report 20114

Introducing the Board

Robert SinclairNon-executive Chairman

Robert Sinclair is managingdirector of the Guernsey-basedArtemis Group and a directorof a number of investment fundmanagement companies andinvestment funds associatedwith clients of that group. He ischairman of Schroder OrientalIncome Fund Limited and is a

director of ING UK Real EstateIncome Trust Limited. Robert is aFellow of the Institute of CharteredAccountants in England and Wales.

11 Apr2007

18 Feb2010

17 May2011

26 Jul2011

12 Aug2011

15 Nov2011

15 Jul2011

Christopher Fish

Robert Sinclair

Walter Hens

Wessel Hamman

Justin Schaefer

Length of appointment Change of responsibility

Shelagh Mason

Richard Kingston

Ian Clarke

Rolf Elgeti

Eitan Milgram

Charles Parkinson

Amanda Spring

I would like to welcome the new Directors tothe Board. The Company has maintained thecorrect Board composition to retain its currenttax, residency and regulatory structure and alsohas greater representation from key shareholderson the Board. Collectively their wealth of experienceis proving extremely useful in this period of transitionfor Sirius.

Chairmans introduction

Robert SinclairChairman

www.sirius-real-estate.com


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Rolf ElgetiNon-executive Director

Rolf Elgeti is currently chief executiveofcer of TAG Immobilien AG, aGerman listed real estate groupwith ca 2bn of assets undermanagement. He is also non

executive chairman of Treveria plc,a German retail focused real estatecompany and member of thesupervisory board of Estavis AG,a German listed real estatecompany specialised in residentialproperty investments in Germany.He graduated with an MBA from theUniversity of Mannheim, Germany,and received an MBA from ESSEC,Paris, in 1999.

Shelagh MasonNon-executive Director

Shelagh Mason is a residentof Guernsey. She is an Englishproperty solicitor with over 25 yearsexperience in commercial property.She is currently a partner in

Spicer and Partners Guernsey LLPspecialising in English commercialproperty. She holds numerouspositions on boards as non-executivedirector, as well as being a pastChairman of the Guernsey Branchof the Institute of Directors anda member of the Chamber ofCommerce and the GuernseyInternational Legal Association.

Justin SchaeferNon-executive Director

Justin Schaefer is an investmentanalyst at Weiss Asset Management,where he has worked since 2008.Prior to Weiss, Justin graduatedfrom the Massachusetts Instituteof Technology in Cambridge, MA.

Amanda SpringNon-executive Director

Amanda Spring is based inBudapest, Hungary and hasa wealth of experience in themulti-let sector having previouslybeen director of Central Europeat TeeslandiOG and prior to thathaving responsibility for the assetmanagement of their mainlandEurope funds. Prior to this she

was managing director of DTZsMoscow ofce.

Ian ClarkeNon-executive Director

Ian Clarke has over 20 yearsexperience in the nance industryin Guernsey including wealthmanagement, the administrationof international trusts, corporateentities and regulated funds. Mostrecently the managing director ofa fund administrator in Guernsey,he has sat on the boards of severalfunds, some of which have beenlisted on recognised Stock Exchanges.

Wessel HammanNon-executive Director

Wessel Hamman was appointeda Director of the Company on17 May 2011. Wessel is a partnerand chief executive of ClearanceCapital LLP, a specialist Europeanreal estate securities investor andadvisor to the Karoo InvestmentFund S.C.A. SICAV-SIF. Wessel isa Chartered Accountant by trainingand spent eleven years in theinvestment banking industrybefore co-founding Clearance

Capital in 2008.

Walter HensNon-executive Director

Walter Hens has over 38 yearsexperience in the European realestate sector, including 20 yearswith SEGRO plc where he mostrecently held the positions ofEuropean managing director andgroup executive director. Walter wasresponsible for Segros Europeanoperations from 2003 to 2007,during which time the companybuilt up a major pan-Europeanportfolio, including a number

of major acquisitions in Germany.Walter is a Fellow of the RoyalInstitute of Chartered Surveyors.

Charles ParkinsonNon-executive Director

Charles Parkinson is the Minister ofthe Treasury & Resources Departmentfor the States of Guernsey. Aftergraduating from Cambridge hequalied as a Chartered Accountant

and was then called to the Barin London. He was an executivein the Corporate Finance divisionof Morgan Grenfell (now DeutscheBank) before returning to Guernsey.He holds several non-executivedirectorships in investment andproperty companies, as well aschairing AIM-listed Eastern EuropeanProperty Fund.


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Chairmans statement

IntroductionI am pleased to announce the Groups half-yearlyresults for the six months ended 30 September 2011.In a difcult trading environment, the Company hasmade good progress. Our rent roll is continuing toincrease, reecting demand from the SME marketfor our unique mix of commercial, ofce and lightengineering space. At the same time, the Companyhas remained focused on renewing existing leaseswith key tenants, which is reected in our improvedretention rates.

The programme of cost reduction and better costrecovery from service charges continues and theCompany expects to benet by a further 1m of costreductions in this nancial year. This has been achieveddespite the substantial increases in electricity andheating costs experienced throughout Germany.

Good progress has also been made on the futuremanagement structure and the Company will in duecourse make an announcement on long-term plansfor the management team.

Results

For the period under review, gross income was22.1m (2010: 22.0m). The improvement in totalincome is despite the loss of 345k of surrenderpremiums which were received in the same periodlast year. The property portfolio, consisting of38 properties, had an annualised gross rent rollof 44.4m (30 September 2010: 41.5m) overa total lettable area of 1.15m sqm.

Recurring prot before tax for the period was0.9m (2010: 1.2m), excluding property revaluation,change in fair value derivative instruments and theone-off impact of the 0.4m costs incurred for

advice relating to the asset management contract.Good progress has been made on reducing theirrecoverable service charge costs through a combinationof optimising contracts and improving allocation,

Robert Sinclair

Chairman

Summary

E The Companys focus is on increasingrental income and reducing the cost baseof the business.

E The move-outs in the period of 37,275 sqmwere signicantly lower than the 73,966 sqmexperienced for the same period last year.

E The Board is in process of determining

the optimum management structure forthe Company going forward.

E The Company has delivered a satisfactorytrading performance for the six months ofthis nancial year and is on track to meetmanagement expectations for the full year.


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therefore bad debts relating to unpaid service chargesare expected to be much lower than previous yearsalthough there will be an impact from the increasedcost of utilities.

Capital expenditure during the six months to30 September 2011 was 4.8m, which was mainlyrelated to creating new space for letting and dealingwith the associated regulatory requirements. We expectcapex investment in the second half to be much lower.

The adjusted EPS, which excludes: property revaluation;related deferred tax and non-controlling interest; andchange in fair value on derivative nancial instruments,was 0.27c as at 30 September 2011 (2010: (0.11c)).

Net Asset Value (NAV)DTZ Zadelhoff Tie Leung GmbH have valued theportfolio at 492.0m (31 March 2011: 505.5m).

The adjusted NAV per share, which excludesdeferred tax and change in fair value adjustmenton nancial derivative instruments, was 66.63c asat 30 September 2011 (31 March 2011: 72.85c).

The reduction in valuation is not reective of the

Companys performance as both income and costrecoveries are moving in a positive direction. Our valuershave indicated that the reduction is due to theirperception of market conditions.

DividendThe Companys focus is on increasing rental incomeand reducing the cost base of the business so thatthe Company can return to paying dividends in duecourse. We will continue to review this policy andexpect to reinstate a progressive dividend once itis prudent to do so.

FinanceAs at 30 September 2011 the Companys borrowings,excluding capitalised loan costs, totalled 300.0m

(31 March 2011: 304.3m), representing an LTVof 61.0% (31 March 2011: 60.2%). Both bankingfacilities are operating within covenants and thefacility with the Royal Bank of Scotland maturesin October 2012. As at 30 September 2011, theCompany had cash reserves of 13m, which is downfrom 24m at the same point last year. The reductionin cash balances stems primarily from debt amortisationand required capital expenditure. The Board is in theprocess of nalising a plan to ensure that the Companyhas sufcient operating cash ow to service itsborrowings and cover future capital expenditurerequirements. This is likely to include further assetmanagement activities to optimise the portfolioand some strategic asset disposals of carefully selectedassets enabling a consolidation of the business andthe creation of a new nancial and operational baseupon which the Company would seek to grow.

Asset managementThe Sirius brand is now well established amongstthe German business park sector and is widely knownamongst the German SME market for providing trulyexible workspace throughout the country. As yet,

the political and economic turmoil across Europe hasyet to result in a slowdown in demand for our productand the manager has continued to see a high levelof enquiries for new space in the Companys portfolio.Sales enquiries are exceeding 1,000 per month inthe majority of months, and the Company sawa 10% increase in the total number of enquiriesfor the period compared to twelve months ago.

The Company signed 65,153 sqm of newleases compared with move-outs of 37,275 sqm.This compares to 87,078 sqm of new leases and73,966 sqm of move-outs in the same period last

year. On a sqm basis, net lettings of 27,878 sqmversus 13,112 sqm represents a solid improvement.However, further success has been achieved in therental rate in the period of 5.18 per sqm comparedto 4.16 per sqm last year. Despite the challenging

The Company saw a 10% increasein the total number of enquiriesfor the period compared to twelvemonths ago.


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Chairmans statement continued

Asset management continued

economic background the Company is starting tosee some signicantly improved returns from creatingthe unique Sirius product. As a result, occupancywas 77% as at 30 September 2011, comparedwith 73% as at 30 September 2010 and 76% as at31 March 2011. It is worth noting that the new lettingssigned in the period will underpin the next period.This is because there has been a longer than expectedlag between signing and moving in. These will comethrough in the second half of the nancial year butwill be offset, somewhat, by the move-out of Siemens(13,161 sqm) which took place post the half year in

October 2011. The improved lettings rate is reectedin the average rental value of the portfolio improvingto 4.18 psm (31 March 2011: 4.13 psm).

A key focus for the Asset Management team hasbeen on tenant retention and in particular retainingthe Companys largest tenants. In July, the Companyextended a 34,200 sqm lease with an existingmultinational tenant at our Munich Neuaubingsite for ten years at an average rate of 4.46 psm,which over the lease will generate 44.7m of income(inclusive of service charge). Additionally, the move-outsin the period of 37,275 sqm were signicantly lower

than the 73,966 sqm experienced for the same periodlast year. This is an encouraging reection of theemphasis the team has placed on retention.

The programme of cost reduction and costrecovery has continued into the current nancial year.This benet has come despite the well documentedincreases in electricity and heating costs throughoutGermany this year. The main benets have come fromoptimising and controlling our facility managementand utilities suppliers combined with the use ofsignicantly improved cost allocation tools. Theimproved optimisation and transparency to tenantsmakes the recovery of service charge costs an easierprocess and we expect this will continue into thefuture to have a positive effect on the bottom line.Overall, we anticipate making further savings ofapproximately 1m in the current nancial year.

In September, the Company sold a parcel of landat the Bremen Brinkmann site and sold part of oneof the sites in Bonn. These two disposals will generateclose to 2.5m of proceeds and around 600,000of prot, which will be reported in the secondhalf of this nancial year. These properties arecurrently generating 115,000 of annual income.Approximately 2m of the proceeds will be usedto repay the loans outstanding at these sites.

Asset management contract

As previously announced, the Board is in the processof determining the optimum management structurefor the Company going forward. The Board has beenin discussions with various parties including PCSREAM,the current Asset Manager. As a result of thesediscussions, the Board will in due course be makingan announcement conrming the long-termmanagement structure of the business.

Board changesOn 15 July 2011, Dick Kingston stood down fromthe Board. His signicant real estate experience wasinvaluable to the Company and on behalf of theBoard I would like to thank him for his contributions.My appointment as Chairman followed once Dickstepped down.

Subsequently, on 26 July 2011, the Company was pleasedto announce the appointments of Ian Clarke, Rolf Elgeti,Shelagh Mason, Eitan Milgram, Charles Parkinsonand Amanda Spring as Non-executive Directors. On15 November 2011, Justin Schaefer was also appointedas Non-executive Director, replacing Eitan Milgram.

With the new Directors to the Board, the Company

has retained a good balance of independent Directorsplus greater representation from key shareholders.Their wealth of experience is proving extremely usefulin this period of transition for Sirius.

OutlookThe Company has delivered a satisfactory tradingperformance for the rst six months of this nancialyear and is on track to meet management expectationsfor the full year. Given the wider market environment,this reects well on the business and its ability toadapt to the needs of tenants.

The Board is focused on nalising the futuremanagement structure together with a new strategicplan to create a long-term nancial and operationalplatform on which to grow the business in the currentmarket environment. The Board is condent that Siriuscan, with time, deliver signicant returns to shareholders.

Robert SinclairChairman


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Independent review reportto the members of Sirius Real Estate Limited

Introduction

We have been engaged by the Company to reviewthe unaudited set of nancial statements in the InterimReport for the six months ended 30 September 2011,which comprises the unaudited consolidated statementof comprehensive income, unaudited consolidatedstatement of nancial position, unaudited consolidatedstatement of changes in equity, unaudited consolidatedstatement of cash ows and the related explanatorynotes. We have read the other information containedin the Interim Report and considered whether itcontains any apparent misstatements or materialinconsistencies with the information in the set

of nancial statements.

This report is made solely to the Company inaccordance with the terms of our engagement.Our review has been undertaken so that we mightstate to the Company those matters we are requiredto state to it in this report and for no other purpose.

To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other thanthe Company for our review work, for this report,or for the conclusions we have reached.

Directors responsibilitiesThe Interim Report is the responsibility of, and hasbeen approved by, the Directors. The Directors areresponsible for preparing the Interim Report inaccordance with the AIM Rules.

As disclosed in note 2(a), the annual nancialstatements of the Group are prepared in accordancewith International Financial Reporting Standards(IFRSs) as adopted by the EU. The unaudited setof nancial statements included in this interim reporthas been prepared in accordance with the recognitionand measurement requirements of IFRSs as adoptedby the EU.

Our responsibilityOur responsibility is to express to the Companya conclusion on the unaudited set of nancialstatements in the Interim Report based on our review.

Scope of review

We conducted our review in accordance withInternational Standard on Review Engagements(UK and Ireland) 2410 Review of Interim FinancialInformation Performed by the Independent Auditorof the Entity issued by the Auditing Practices Boardfor use in the UK. A review of interim nancialinformation consists of making enquiries, primarilyof persons responsible for nancial and accountingmatters, and applying analytical and other reviewprocedures. A review is substantially less in scopethan an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland)

and consequently does not enable us to obtainassurance that we would become aware of allsignicant matters that might be identied inan audit. Accordingly, we do not express anaudit opinion.

ConclusionBased on our review, nothing has come to ourattention that causes us to believe that the unauditedset of nancial statements in the Interim Report forthe six months ended 30 September 2011 is notprepared, in all material respects, in accordance with

the recognition and measurement requirementsof IFRS as adopted by the EU and the AIM Rules.

KPMG Channel Islands LimitedChartered AccountantsGuernsey2 December 2011


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Unaudited consolidated statement of comprehensive incomefor the six months ended 30 September 2011

Notes

(Unaudited)six months ended

30 September 2011000



(Audited) twelvemonths ended

31 March 2011000

Rental income 4 22,078 22,012 45,568Direct costs 5 (9,858) (10,274) (22,922)

Net rental income 12,220 11,738 22,646

Decit on revaluation of investment properties 10 (19,387) (1,710) (367)Administrative expenses 5 (1,729) (1,985) (4,141)Other operating expenses 5 (1,099) (1,026) (2,175)

Operating (loss)/prot (9,995) 7,017 15,963Finance income 6 82 64 126Finance expense 6 (8,917) (8,981) (17,832)Change in fair value of derivative

nancial instruments (4,201) (1,500) 5,184(Loss)/prot before tax (23,031) (3,400) 3,441Taxation 7 (177) (234) (711)

(Loss)/prot for the period (23,208) (3,634) 2,730

(Loss)/prot attributable to:Owners of the Company (22,929) (3,908) 2,519Non-controlling interest (279) 274 211

Loss for the period (23,208) (3,634) 2,730

Earnings per shareBasic and diluted, for comprehensive income forthe period attributable to ordinary equity holdersof the Parent Company 8 (7.59)c (1.29)c 0.83c

The notes on pages 13 to 20 form an integral part of these nancial statements.


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Unaudited consolidated statement of nancial positionas at 30 September 2011

Notes

(Unaudited)30 September 2011

000


000

(Audited)31 March 2011

000

Noncurrent assetsInvestment properties 10 491,960 501,180 505,500Plant and equipment 3,349 4,903 4,679

Total noncurrent assets 495,309 506,083 510,179

Current assetsTrade and other receivables 6,775 8,292 7,272Prepayments 483 479 233Derivative nancial instruments 14 25 165Cash and cash equivalents 11 12,613 28,650 23,583

Total current assets 19,896 37,421 31,253

Total assets 515,205 543,504 541,432Current liabilitiesTrade and other payables 12 (14,580) (15,290) (17,162)Interest-bearing loans and borrowings 13 (7,842) (7,383) (7,669)Current tax liabilities (67) (564) (707)Derivative nancial instruments 14 (13,505) (15,963) (9,444)

Total current liabilities (35,994) (39,200) (34,982)

Noncurrent liabilitiesInterest-bearing loans and borrowings 13 (290,576) (299,001) (294,546)Deferred tax liabilities 7 (1,863) (1,687) (1,924)

Total noncurrent liabilities (292,439) (300,688) (296,470)

Total liabilities (328,433) (339,888) (331,452)

Net assets 186,772 203,616 209,980

EquityIssued share capital 15 Other distributable reserve 300,111 300,111 300,111Retained earnings (114,079) (97,577) (91,150)

Total equity attributable to the equity holdersof the Parent Company 186,032 202,534 208,961Non-controlling interests 740 1,082 1,019

Total equity 186,772 203,616 209,980


The nancial statements on pages 10 to 20 were approved by the Board of Directors on 2 December 2011 and were

signed on its behalf by:

Charles ParkinsonDirector


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Issuedshare capital

000

Otherdistributable

reserve000

Retainedearnings

000

Total equityattributable

to the equityholders of the

Parent Company000

Non-controllinginterests

000Total equity

000

As at 31 March 2010 300,111 (93,669) 206,442 808 207,250Loss for the period (3,908) (3,908) 274 (3,634)

As at 30 September 2010 300,111 (97,577) 202,534 1,082 203,616Prot for the period 6,427 6,427 (63) 6,364

As at 31 March 2011 300,111 (91,150) 208,961 1,019 209,980Loss for the period (22,929) (22,929) (279) (23,208)

As at 30 September 2011 300,111 (114,079) 186,032 740 186,772


Unaudited consolidated statement of cash owsfor the six months ended 30 September 2011






31 March 2011000

Operating activities(Loss)/prot before tax (23,031) (3,400) 3,441Adjustments for:Decit on revaluation of investment properties 19,387 1,710 367Change in fair value of derivative nancial instruments 4,201 1,500 (5,184)Depreciation 418 414 881Finance income (82) (64) (126)Finance expense 8,917 8,981 17,832

Cash ows from operations before changes in working capital 9,810 9,141 17,211

Changes in working capitalDecrease in trade and other receivables 248 3,401 4,665(Decrease)/increase in trade and other payables (2,461) (848) 3,080Taxation paid (877) (33) (121)

Cash ows from operating activities 6,720 11,661 24,835

Investing activitiesDevelopment expenditure (4,829) (5,611) (9,303)Purchase of plant and equipment (276) (563) (901)Proceeds on disposal of plant and equipment 56Interest received 82 64 126

Cash ows used in investing activities (5,023) (6,110) (10,022)

Financing activitiesProceeds from loans 1,990 2,490Repayment of loans (4,334) (3,900) (9,121)Finance charges paid (8,333) (8,392) (18,000)

Cash ows from nancing activities (12,667) (10,302) (24,631)

Decrease in cash and cash equivalents (10,970) (4,751) (9,818)Cash and cash equivalents at the beginning of the period 23,583 33,401 33,401

Cash and cash equivalents at the end of the period 12,613 28,650 23,583


Unaudited consolidated statement of changes in equityfor the six months ended 30 September 2011


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Notes forming part of the nancial statementsfor the six months ended 30 September 2011

1. General information

Sirius Real Estate Limited (the Company) is a company incorporated and domiciled in Guernsey whose sharesare publicly traded on AIM.

The consolidated nancial statements of Sirius Real Estate Limited comprise the Company and its subsidiaries(together referred to as the Group).

The principal activity of the Group is investment in and development of commercial property to provide exibleworkspace in Germany.

The consolidated nancial statements of the Group as at and for the year ended 31 March 2011 are available uponrequest from the Companys registered ofce at PO Box 119, Martello Court, Admiral Park, St. Peter Port, GuernseyGY1 3HB, Channel Islands or at www.sirius-real-estate.com.

The Company acts as the investment holding company of the Group.

2. Signicant accounting policies(a) Basis of preparationThe consolidated nancial statements have been prepared on a historical cost basis, except for investment properties,investment properties under construction and derivative nancial instruments which have been measured at fair value.The consolidated nancial statements are presented in euros and all values are rounded to the nearest thousand (000)except where otherwise indicated.

The consolidated nancial statements of the Group for the year ended 31 March 2011 have been prepared in accordancewith IFRSs adopted for use in the EU (Adopted IFRSs), and The Companies (Guernsey) Law, 2008. The interim set ofnancial statements included in this Interim Report has been prepared in accordance with the recognition and measurementrequirements of Adopted IFRSs. The interim set of nancial statements has been prepared applying the accounting policies

and presentation that were applied in the preparation of the Companys published consolidated nancial statements forthe year ended 31 March 2011. They do not include all of the information required for full annual nancial statements,and should be read in conjunction with the consolidated nancial statements of the Group as at and for the year ended31 March 2011.

These nancial statements have been prepared on a going concern basis as it is the view of the Directors that thisis the most appropriate basis of preparation to adopt having considered the issues identied below:

Asset management agreementOn 3 May 2011, the Company announced that it was in discussion with the Asset Manager with the objectiveof agreeing new management arrangements following termination of the existing arrangement as part of a reviewto ensure shareholders receive the best value and quality of service. The Board has been in discussions with variousparties including PCSREAM, the current Asset Manager.

FinancialThe Group incurred a net loss of 23,208,000 during the period ended 30 September 2011 (30 September 2010: 3,634,000).The Directors have prepared cash ow forecasts for a period greater than twelve months from the date of approval of thehalf-yearly results. These forecasts show that the Group will require additional nancing in October 2012.

The Board is in the process of nalising a plan to ensure that the Company has sufcient operating cash ow to serviceits borrowings and cover future capital expenditure requirements. This is likely to include further asset management activitiesto optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of thebusiness and the creation of a new nancial and operational base upon which the Company would seek to grow.

Based on the reasons outlined above, the Directors believe that it remains appropriate to prepare the nancial statementson a going concern basis.


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Notes forming part of the nancial statements continuedfor the six months ended 30 September 2011

2. Signicant accounting policies continued

(b) Basis of consolidationThe consolidated nancial statements comprise the nancial statements of the Company and its subsidiaries asat 30 September 2011. The nancial statements of the subsidiaries are prepared for the same reporting periodas the Parent Company, using consistent accounting policies.

All intra-group balances and transactions and any unrealised income and expenses and prots and losses arising fromintra-group transactions are eliminated in preparing the consolidated nancial statements.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control,and continue to be consolidated until the date that such control ceases.

Non-controlling interests represent the portion of prot or loss and net assets not held by the Group and are presentedseparately in the consolidated statement of comprehensive income and within equity in the consolidated statementof nancial position, separately from the Parent Company shareholders equity.

(c) Signicant accounting policiesThe accounting policies applied by the Group in these consolidated nancial statements are the same as those appliedby the Group in its consolidated nancial statements as at and for the year ended 31 March 2011.

3. Operating segmentsSegment information is presented in respect of the Groups operating segments. The operating segments are based onthe Groups management and internal reporting structure. Segment results and assets include items directly attributableto a segment as well as those that can be allocated to a segment on a reasonable basis.

Management considers that there is only one geographical segment which is Germany, and one business segment whichis investment in commercial property.

4. Revenue(Unaudited)

six months ended30 September 2011

000




31 March 2011000

Rental income from investment properties 22,078 22,012 45,568

5. Operating prot/(loss)The following items have been charged or credited in arriving at operating prot/(loss):

Direct costs(Unaudited)


000




31 March 2011000

Service charge income (15,088) (12,431) (24,995)Property costs 22,503 20,432 43,292

Irrecoverable property costs 7,415 8,001 18,297Property management fee 877 739 1,559Asset management fee 1,518 1,476 2,974Development fee 48 58 92

Direct costs 9,858 10,274 22,922


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5. Operating prot/(loss) continued

Administrative expenses(Unaudited)


000




31 March 2011000

Audit fee 112 100 252Legal and professional fees 936 1,251 2,598Other administration costs 320 285 909Non-recurring costs 361 349 382

Administrative expenses 1,729 1,985 4,141

Other operating expenses(Unaudited)


000

(Unaudited)


000

(Audited) twelve

months ended31 March 2011

000

Directors fees 106 105 220Bank fees 54 63 174Depreciation 418 414 881Marketing and other expenses 521 444 900

Other operating expenses 1,099 1,026 2,175

The Group has no full-time employees and the Board of Directors consists of nine Non-executive Directors. The employeesworking for the Group are all employed by Principle Capital Sirius Real Estate Asset Management Ltd, the Asset Manageror Sirius Facilities GmbH, the German operating company of the Asset Manager.

6. Finance income and expense(Unaudited)


000




31 March 2011000

Bank interest income 82 64 126

Finance income 82 64 126

Bank interest expense (8,380) (8,447) (16,760)Amortisation of capitalised nance costs (537) (534) (1,072)

Finance expense (8,917) (8,981) (17,832)

Net nance expense (8,835) (8,917) (17,706)

7. TaxationConsolidated statement of comprehensive income






31 March 2011000

Current income taxCurrent income tax charge (178) 292 (583)Adjustments in respect of prior period (60)* (116) 167

(238) 176 (416)

Deferred taxRelating to origination and reversal of temporary differences 61 58 (295)

Income tax (credit)/charge reported in the statementof comprehensive income (177) 234 (711)


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7. Taxation continued

Deferred income tax liability(Unaudited)


000




31 March 2011000

Opening balance 1,924 1,629 1,629Revaluation of investment properties to fair value (61) 58 295

Balance as at period end 1,863 1,687 1,924

* This relates to refunds of prior year tax which have not been included in the March 2011 accrual.

Management does not recognise deferred tax assets in respect of revaluation losses as they may not be used to offsettaxable prots elsewhere in the Group.

8. Earnings per shareThe calculation of the basic, diluted and adjusted earnings per share is based on the following data:






31 March 2011000

Earnings(Loss)/prot for the period attributable to the equity holdersof the parent (22,929) (3,908) 2,519

Basic and diluted earnings (22,929) (3,908) 2,519Add back revaluation decits (net of related tax) 19,196 1,721 438

Add back change in fair value of derivative nancial instruments 4,201 1,500 (5,184)Add back non-recurring costs 361 349 382

Adjusted earnings 829 (338) (1,845)

Number of sharesWeighted average number of ordinary shares for the purposeof basic and diluted earnings per share 302,223,176 302,223,176 302,223,176

Weighted average number of ordinary shares for the purposeof adjusted earnings per share 302,223,176 302,223,176 302,223,176

Basic and diluted earnings per share (7.59)c (1.29)c 0.83c

Adjusted earnings per share 0.27c (0.11)c (0.61)c

The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares.

The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Groupsunderlying business performance; accordingly it excludes the effect of non-recurring costs, deferred tax and the revaluationdecits on the investment properties and derivative instruments.

As there are no share options in issue, the diluted earnings per share is identical to the basic earnings per share.


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9. Net assets per share(Unaudited)



000


000

Net assetsNet assets for the purpose of assets per share (assets attributableto the equity holders of the parent) 186,032 202,534 208,961Deferred tax arising on revaluation of properties 1,863 1,685 1,921Derivative nancial instruments 13,480 15,963 9,279

Adjusted net assets attributable to equity holders of the parent 201,375 220,182 220,161

Number of sharesNumber of ordinary shares for the purpose of net assets per share 302,223,176 302,223,176 302,223,176Net assets per share 61.55c 67.01c 69.14cAdjusted net assets per share 66.63c 72.85c 72.85c

The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares.

10. Investment properties(Unaudited)



000


000

Opening balance 505,500 500,010 500,010Additions 5,847 2,880 5,857Revaluation of investment properties to fair value (19,387) (1,710) (367)


The fair value of the Groups investment properties at 30 September 2011 has been arrived at on the basis of a valuationcarried out at that date by DTZ Zadelhoff Tie Leung GmbH, an independent valuer.

The value of each of the properties has been assessed in accordance with the RICS Valuation Standards on the basis ofmarket value. Market value was primarily derived using a ten-year discounted cash ow model supported by comparableevidence. The discounted cash ow calculation is a valuation of rental income considering non-recoverable costs andapplying a discount rate for the current income risk over a ten-year period. After ten years a determining residual value(exit scenario) is calculated. A cap rate is applied to the more uncertain future income, discounted to a present value.

On 14 September 2011 an agreement was made to dispose of some land at the Brinkmann site for 1,073,670. The saleis conditional on the purchaser acquiring an adjacent piece of land from the local authority and this is expected to takeplace at the latest by 28 March 2012.

On 29 September 2011 an agreement was made to dispose of two buildings at the Knigswinter site for 1,450,000.

Due to the process that needs to be followed, legal title on the deal is expected to transfer on 2 January 2012.

11. Cash and cash equivalents(Unaudited)



000


000

Cash at banks and in hand 12,613 28,650 23,583


The fair value of cash is 12,612,510 (31 March 2011: 23,583,498).

As at 30 September 2011 5,281,934 (31 March 2011: 6,717,701) of cash is held in blocked accounts. Of this 142,077(31 March 2011: 1,370,898) is under control of lenders who release this to the Group upon request to be used for capital

expenditure on properties. 1,958,257 (31 March 2011: 1,941,435) relates to deposits received from tenants and 15,585(31 March 2011: 15,546) is cash held on escrow as requested by a supplier and an amount of 3,166,015 (31 March 2011:3,389,822) relates to amounts reserved for future bank loan interest and amortisation payments.


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12. Trade and other payables(Unaudited)



000


000

Trade payables 3,785 4,559 5,665Accrued expenses 5,267 3,571 3,991Accrued interest 1,154 2,416 1,107Other payables 3,976 3,411 6,283Related party payables 398 1,333 116


13. Interest-bearing loans and borrowings

Effectiveinterest rate

% Maturity

(Unaudited)30 September

2011000

(Unaudited)30 September

2010000

(Audited)31 March

2011000

CurrentABN Amro Loan 5.85 15 October 2012 2,186 2,030 2,156Berlin-HannoverscheHypothekenbank AG xed rate facility 5.28 30 March 2013 1,325 1,271 1,290Berlin-HannoverscheHypothekenbank AG hedged oating rate facility

Hedgedoating

31 March 2013 31 December 2013 4,135 3,894 4,012

Berlin-HannoverscheHypothekenbank AG

capped oating rate facility

Capped

oating 31 December 2013 1,323 1,251 1,286Capitalised nance chargeson all loans (1,127) (1,063) (1,075)

7,842 7,383 7,669

NoncurrentABN Amro Loan 5.85 15 October 2012 90,116 93,414 91,217Berlin-HannoverscheHypothekenbank AG xed rate facility 5.28 30 March 2013 48,990 49,787 49,661Berlin-HannoverscheHypothekenbank AG hedged oating rate facility

Hedgedoating

31 March 2013 31 December 2013 111,001 115,136 113,108

Berlin-HannoverscheHypothekenbank AG

capped oating rate facility

Capped

oating 31 December 2013 40,925 42,248 41,605Capitalised nance chargeson all loans (456) (1,584) (1,045)

290,576 299,001 294,546

Total 298,418 306,384 302,215

The Group has pledged 34 investment properties to secure related interest-bearing debt facilities granted to the Group.The 34 properties had a combined valuation of 453,660,000 as at 30 September 2011 (31 March 2011: 465,310,000).


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13. Interest-bearing loans and borrowings continued

ABN Amro Bank N.V.This facility had 100,951,940 drawn down, of which 8,649,346 has been amortised to date, resulting in a liabilityof 92,302,594 as at 30 September 2011. The interest is xed at a weighted average interest rate of 5.85% per annum.The nal repayment date is 15 October 2012. This loan is secured over 16 property assets and is subject to various covenantswith which the Group has complied.

Berlin-Hannoversche Hypothekenbank AGFacilities of 226,500,000 have been granted by Berlin-Hannoversche Hypothekenbank AG. To date 18,801,981 hasbeen amortised, resulting in a liability of 207,698,019 at September 2011.

The facility is split into three portfolios: Portfolio I is split with either an interest rate of 1.18 margin over three monthsEURIBOR xed by a SWAP at 4.42%, or a xed rate of 5.46%. The latest drawdown has a xed rate of 2.81% for theloan facility. Portfolio II has an interest rate of 1.08 margin over three months EURIBOR xed by a SWAP at 4.95% and

Portfolio III is at a oating rate capped at 5.98%. This facility is secured over 18 property assets and is subject to variouscovenants with which the Group has complied.

14. Financial instrumentsFair valuesSet out below is a comparison by category of carrying amounts and fair values of all the Groups nancial instrumentsthat are carried in the nancial statements:




Carryingamount

000

Fairvalue000

Carryingamount

000

Fairvalue000

Carryingamount

000

Fairvalue000

Financial assetsCash 12,613 12,613 28,650 28,650 23,583 23,583Derivative nancial instruments 25 25 165 165Trade receivables 3,661 3,661 3,464 3,464 5,577 5,577

Financial liabilitiesTrade payables 3,785 3,785 4,559 4,559 5,665 5,665Derivative nancial instruments 13,505 13,505 15,963 15,963 9,444 9,444Interest-bearing loans and borrowings:Floating rate borrowings hedged* 115,136 115,136 119,030 119,030 117,120 117,120Floating rate borrowings capped** 42,248 42,248 43,499 43,499 42,891 42,891Fixed rate borrowings 142,616 145,575 146,502 154,276 144,324 149,616

* The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risk of expected cash ows of borrowing

for the Groups variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The swap contracts mature between March 2013and June 2018.

** The Group holds interest rate caps designed to manage the interest rate and liquidity risk of expected cash ows of borrowing for theGroups variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The cap contracts mature at December 2013, the same timeas the loans.


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15. Issued share capitalNumber Share capital

AuthorisedOrdinary shares of no par value Unlimited

As at 30 September 2011 Unlimited

Issued and fully paidOrdinary shares of no par value 327,800,000 Share brought back and held in treasury (25,576,824)

As at 30 September 2011 302,223,176

Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at anygeneral meeting.

The Company holds 25,576,824 of its own shares, which continue to be held as treasury. No share buybacks were madein the period.

16. DividendsIn order to sustain investment in the Groups portfolio whilst also ensuring cash resources are preserved, the Boardhas proposed to not pay a dividend in the period ended 30 September 2011.

17. Capital commitmentsAs at 30 September 2011 the Group had contracted capital expenditure on existing properties of 1,160,737.These were committed but not yet provided for.

18. Carried interestMarba Holland B.V. is a joint venture between a subsidiary of Principle Capital Holdings S.A., Frank and Kevin Oppenheimand certain other individuals. Marba Holland B.V. has a right to carried interest. In any year Marba Holland B.V. is not entitledto any carried interest unless the Groups net asset value per ordinary share exceeds the performance hurdle applicableto that nancial year.

For the period ended September 2011 the performance hurdle applicable is calculated as 10% of the higher of:

the average of the net asset values per ordinary share at the end of 31 March 2010 and 31 March 2011; and

the net asset value per ordinary share at the end of 31 March 2011.

If the hurdle is achieved then Marba Holland B.V. will be entitled to 20% of the amount by which the performance

hurdle is exceeded by the Group in respect of that nancial period. The carried interest will also be payable on theoccurrence of certain other events, such as a takeover or liquidation of the Group.

No amount has been provided as at 30 September 2011 as the minimum hurdle rate required has not been achieved.


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Shareholder information and corporate details

www.sirius-real-estate.com

Directors

Robert Sinclair (Non-executive Chairman)Walter Hens (Non-executive Director)Wessel Hamman (Non-executive Director)Ian Clarke (Non-executive Director)Rolf Elgeti (Non-executive Director)Shelagh Mason (Non-executive Director)Charles Parkinson (Non-executive Director)Amanda Spring (Non-executive Director)Justin Schaefer (Non-executive Director)

Registered ofcePO Box 119Martello Court

Admiral ParkSt. Peter PortGuernsey GY1 3HBChannel Islandswww.siriusrealestate.com

Registered numberIncorporated in Guernsey under The Companies (Guernsey)Laws, 2008, as amended, under number 46442

Company secretary and administratorIntertrust Fund Services (Guernsey) LimitedPO Box 119

Martello CourtAdmiral ParkSt. Peter PortGuernsey GY1 3HBChannel Islands

Asset manager

Principal Capital SiriusReal Estate AssetManagement LimitedSt Jamess House23 King StreetLondon SW1Y 6QY

Nominated adviserand brokerPeel Hunt LLPMoor House120 London WallLondon EC2Y 5ET

Property valuersDTZ ZadelhoffTie Leung GmbHEschersheimerLandstrasse 660322 Frankfurt am MainGermany

Auditors

KPMG Channel IslandsLimited20 New StreetSt. Peter PortGuernsey GY1 4ANChannel Islands

Guernsey solicitorsCarey OlsenPO Box 987 New StreetSt. Peter PortGuernsey GY1 4BZ

Channel Islands

UK solicitorsNorton Rose LLP3 More London RiversideLondon SE1 2AQ


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sirius real estate limited interim report 2011

Documents